EXHIBIT 10.27
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED NOTE
$407,000.00 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay the Lawrence H. Schubert Revocable Trust dated August 25,
1996 (together with any subsequent holder of this Note, the "Obligee") the
principal sum of Four Hundred Seven Thousand and 00/100 Dollars ($407,000.00),
with interest in arrears on the unpaid principal balance from time to time
outstanding from the date hereof until due and payable at the rate provided in
Section 1 (a) hereof. Each holder of this Note, by acceptance hereof, agrees to
and shall be bound by the provisions of this Note, including without
limitation, the subordination provisions in Section 2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of ten percent (10%) per annum
(computed on the basis of a 365-day year). Principal shall be due and payable in
five (5) quarterly installments of $81,400 beginning February 21, 1999. Interest
at the rate of 10% per annum shall be payable quarterly, in arrears, beginning
February 21, 1997. Except as otherwise set forth in this Agreement, all payments
of principal and interest hereunder shall be made by the Company in lawful money
of the United States of America in immediately available funds on the date such
payment is due at the address of the Obligee on the books of the Company or such
other place as the holder hereof shall designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in cash of all Senior
Indebtedness and that the subordination of this Note pursuant to this Section 2
is for the benefit of all holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind of character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness or
such payment shall first be duly provided for in cash or in a
manner satisfactory to the holders of Senior Indebtedness
before Obligee shall be entitled to receive any payment on
this Note: and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of Senior
Indebtedness, any payment or distribution to which the Obligee
would be entitled but for this Section shall be made to the
Agent (as defined below) for application to the payment of the
Senior Indebtedness.
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(iii) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment is
prohibited by this Section, such payment or distribution shall
be held by the Obligee in trust for the ratable benefit of,
and shall be paid forthwith over and delivered to, the Agent
for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness, and the Obligee
irrevocably authorized, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and others
having authority in the premises to effect all such payments
and distributions, and the Obligee also irrevocably
authorized, empowers and directs the Agent to demand, sue
for, collect and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any such
Proceeding and hereby irrevocably authorizes, empowers and
appoints the Agent as the Company's agent and attorney-in-fact
to (A) execute, verify, deliver and file such proofs of claim
and (B) vote such claim in any such Proceeding; provided that
the Agency shall have no obligation to execute, verify,
deliver, file and/or vote any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of time,
acceleration (unless waived in writing by the holders of
Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment duly
provided for, in cash or in a manner satisfactory to the
holders of the Senior Indebtedness, before any payment is made
by the Company on account of this Note and, until all of the
Senior Indebtedness is paid in full, any payment or other
distribution to which the Obligee would be entitled but for
the provisions of this Section shall (unless otherwise
required by this Section 2) be made to the Agent, for
application to the payment of the Senior Indebtedness.
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(ii) During the continuance of any default in the payment of any of
the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note until
such payment default has been cured by the Company or waived
in writing by the holders of the Senior Indebtedness. Upon any
such cure or waiver, payments may resume, but no interest on
this Note shall accrue during or be paid with respect to the
period for which there is a payment default on the Senior
Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon receipt
by the Company of written notice from the Agent specifying
that such notice is a payment blockage notice delivered
pursuant to this Section, the Company may not make any payment
of interest or other amounts owing on this Note for a period
("Payment Blockage Period") commencing on the date of receipt
of such notice and ending one hundred and eighty (180) days
thereafter (unless such Payment Blockage Period shall be
terminated by written notice to the Company from the Agent).
The aggregate duration of all Payment Blockage Periods for
such nonpayment defaults shall not exceed one hundred eight
(180) days during any period of three hundred sixty (360)
consecutive days. During any Payment Blockage Period, interest
shall continue to accrue as otherwise provided herein. Upon
the termination of any Payment Blockage Period, payments of
interest and/or principal shall resume as provided in Section
1; provided that the outstanding principal balance of this
Note shall be increased by the amount of interest that accrued
during such Payment Blockage Period and no interest shall be
paid with respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the Credit
Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment is
prohibited by this Section, unless otherwise required by this
Section, such payment or distribution shall be held by Obligee
in trust for the ratable benefit of, and shall be paid
forthwith over and delivered
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to, the Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent necessary
to pay all of the Senior Indebtedness in full in accordance
with its terms, after giving effect to any concurrent payment
or distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise by returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, not will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
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(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATION OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation,
subordinating this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
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(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity as
agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the Credit
Agreement, provided that the Obligee may rely on a certificate
from any such successor agent to the effect that such
successor is acting as a successor agent under the Credit
Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or in any
other manner, the whole or any part of any moneys which may
now or hereafter be owing by the Company under this Note, (B)
to initiate or participate with others in any lawsuit, action,
or Proceeding against the Company to (1) enforce payment of or
to collect the whole or any part of the indebtedness evidenced
by this Note, or (2) commence judicial enforcement of any of
the rights and remedies under this Note or under applicable
law with respect to this Note, or (C) to accelerate any
indebtedness evidenced by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __, 1997, among the Company, the Banks from time to
time parties thereto and Bank of Boston Connecticut, as Agent,
as the same hereafter be amended, modified, supplemented,
restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
receivership, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding for
the liquidation, dissolution or other winding up of the
Company.
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(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any Subsidiaries
of the Company and the holders of Senior Indebtedness,
including without limitation all notes, pledge agreements,
security agreements and guarantees, together with any and all
other instruments, documents and agreements executed and
delivered by the Company or any Subsidiary of the Company from
time to time in connection with the Senior Indebtedness
evidenced by the Credit Agreement and such notes, as the same
may hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that certain
Securities Purchase Agreement, dated as of February __, 1997,
by and among the Company, Triumph - Connecticut Limited
Partnership ("Triumph"), Bachow Investment Partners III, L.P.
("Bachow") and the other parties named therein (the "Purchase
Agreement"), and those certain Senior Subordinated Notes, due
February __, 2002, in an aggregate principal amount of
$25,000,000, issued to each of Triumph and Bachow pursuant to
the Purchase Agreement, and any "put note" issued by the
Company to either Triumph or Bachow pursuant to the terms of
those certain Common Stock Warrants to Purchase Common Stock
of the Company, dated as of February __, 1997 issued to
Triumph and Bachow pursuant to the Purchase Agreement, as any
of the foregoing may hereafter be amended, modified,
supplemented, restated or extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation,
partnership, limited liability company or other entity are at
the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
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3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the United
States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(ii) have filed an answer or other pleading admitting or failing to
deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein
provided, or have failed to controvert timely the material
allegations of any such petition;
(iii) be subject to the entry of an order for relief against it in
any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days;
(iv) have sought relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the
insolvency, liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or have
consented to or acquiesced in such relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent or
(B) ordering or approving its liquidation, reorganization or
any or any modification or alteration of the rights of its
creditors which remains undischarged or unstayed for more than
sixty (60) days;
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(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver or
other custodian for, all or a substantial part of its property
which remains undischarged or unstayed for more than sixty
(60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this Note
and accrued interest thereon, if any, due and payable; and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under the applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Note shall be governed by such new law as of its
effective date. If, from any circumstances whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Obligee should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. This provision
shall control every other provision of all agreements between the Company and
the Obligee.
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5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRAIL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
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IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ROBERT LEFCORT
----------------------------
Name: Robert Lefcort
Title: Executive Vice President
AGREED AND ACCEPTED:
OBLIGEE
By: LAWRENCE H. SCHUBERT BY [ILLEGIBLE] ATTORNEY IN FACT
-------------------------
Lawrence H. Schubert, as
Trustee of the Lawrence H.
Schubert Revocable Trust
dated August 25, 1996
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